**Exhibit 4.1**

 

**STOCK OPTION PLAN OF**

**ÆTERNAZENTARIS INC.**

 

**1.****            ****Purpose of the Plan**

 

1.1           The purpose of the stock option plan for directors, officers,employees and suppliers of ongoing services (the “**Plan”**) of Æterna Zentaris Inc. (the “**Corporation”**) is to secure for theCorporation and its shareholders the benefit of an incentive interest in shareownership by directors, officers and employees of the Corporation and itsSubsidiaries, as the case may be, and by certain designated suppliers ofongoing services.

 

**2.****            ****Administration**

 

2.1           The Plan shall be administered by the Corporation’s Board of Directors(the “**Board**”) or theCorporate Governance, Nominating and Human Resources Committee, as the same maybe constituted from time to time (the “**Committee**”).The Board or the Committee shall have full and complete latitude to interpretthe Plan and to establish the rules and regulations applying to it and tomake all other determinations it deems necessary or useful for theadministration of the Plan, provided that such interpretations, rules,regulations and determinations shall be consistent with the relevant policystatements of the competent securities authorities and the rules of thestock exchanges on which the securities of the Corporation are listed.

 

**3.****            ****Shares Subject to the Plan**

 

3.1           The shares issuable further to the exercise of options granted underthe Plan are the Common Shares of the Corporation (the “**Shares**”). The total number of Shares thatmay be issued under the Plan shall not exceed eleven point four percent (11.4%)of the total number of issued and outstanding Shares at any given time.No Optionee (as defined hereinbelow) shall hold options to purchasemore than five percent (5%) of the number of Shares issued and outstanding fromtime to time.

 

3.2           In addition: (i) the number of securities issued to “insiders”(as such term is defined in the TSX Company Manual) of the Corporation, atany time, under all security-based compensation arrangements of theCorporation, cannot exceed ten percent (10% ) of its issued andoutstanding securities; and (ii) the number of securities issuable toinsiders of the Corporation, within any one-year period, under allsecurity-based compensation arrangements of the Corporation, cannot exceed tenpercent (10%) of its issued and outstanding securities.

 

3.3           In addition: (i) the aggregate fair value of options granted underall security-based compensation arrangements of the Corporation to any onenon-employee director of the Corporation entitled to receive a benefit underthe Plan, within any one-year period, cannot exceed US$100,000 valued on aBlack-Scholes basis and as determined by the Committee; and (ii) theaggregate number of securities issuable to all non-employee directors of theCorporation entitled to receive a benefit under the Plan, within any one-yearperiod, under all security-based compensation arrangements of the Corporation,cannot exceed one percent (1%) of its issued and outstanding securities.

 

3.4           All options that are exercised, or that expire or are cancelled withoutbeing exercised, shall become available to be granted (or “reloaded”)under the terms of the Plan upon such exercise, cancellation or expiration, asthe case may be.

 

**4.****            ****Grant of Options**

 

4.1           The Board or the Committee shall from to time designate thedirectors (non-employee directors in the case of directors of theCorporation), officers or employees of the Corporation or any of itsSubsidiaries, as the case may be, or suppliers of ongoing services to whomoptions shall be granted (an “**Optionee**”)and the number of Shares covered by each of such options. For the purposes ofthe Plan, “**Subsidiaries**” shallmean any legal entity of which the Corporation holds or is the beneficiary, atany time, directly or indirectly, otherwise than as security only, ofsecurities conferring over fifty percent (50%) of the votes enabling it toelect the majority of the directors of such entity as well as any current orfuture Subsidiary of such legal entity. Any Optionee may hold more than oneoption. The granting of each option shall be evidenced by a letter from theCorporation addressed to the Optionee setting forth the number of Sharescovered by such option, the subscription price, the terms and conditions ofexercise of the option and the option period.

 

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4.2           Subject to the provisions of Section 3, the non-employee directorsof the Corporation are eligible to receive grants of up to 40,000 optionsupon or in connection with their election or appointment to the Board and areeligible to receive grants of up to 20,000 options for each and every yearthereafter. These options shall be vested over a period of three (3) yearsin equal thirds with the first third becoming vested on the first anniversaryof the grant date, the second third becoming vested on the second anniversaryof the grant date and the final third becoming vested on thethird anniversary of the grant date. The specific number of options to begranted to non-employee directors in accordance with the foregoing shall bedetermined by the Board upon recommendation of the Committee.

 

**5.****            ****Exercise Price**

 

5.1           The exercise price of an option shall be established by the Board orthe Committee at the time of the grant and this price shall not be less thanthe greater of the closing prices of the Shares on the Toronto Stock Exchangeand the Nasdaq National Market on the last trading day preceding the date ofgrant of the option (the “**Grant Date**”).If either of these exchanges is closed or if the Shares did not trade on one ofthe two exchanges on the last trading day preceding the Grant Date, theexercise price shall be the closing price of the Shares at the open exchange (“**Exercise Price**”).

 

The closing price of the Shares shall be converted into Canadiandollars, when this conversion is required, at the noon buying rate of theBank of Canada on the last trading day preceding the Grant Date established inthe previous paragraph.

 

**6.****            ****Option Period**

 

6.1           Subject to the provisions of Section 6.2, each option granted underthe Plan shall be exercisable during a period established by the Board orthe Committee (the “**Option Period**”).The Option Period shall commence no earlier than the Grant Date and shallterminate no later than ten years after such date (the “**Outside Expiry Date**”).

 

6.2           Notwithstanding the provisions of Section 6.1, an option shall notbe exercisable by an Optionee from and after each and every one of thefollowing dates (an “**Early Expiry Date**”),unless the Board or the Committee decides otherwise:

 

6.2.1        (i) in the case where the Optionee is an officer or an employee,the date on which the Optionee resigns or voluntarily leaves his employmentwith the Corporation or one of its Subsidiaries, as the case may be, or thedate on which the employment of the Optionee with the Corporation or one of itsSubsidiaries is terminated for just cause, as the case may be, including,without limiting the scope of the foregoing, in the event of a breach of hisobligations to the Corporation, or (ii) in the case where the Optionee isa director of the Corporation or one of its Subsidiaries, as the case may be,but is not employed by either the Corporation or one of its Subsidiaries, thedate on which such Optionee ceases to be a member of the relevant Board ofDirectors for any reason other than death;

 

6.2.2        (i) in the case where the Optionee is an officer or employee, six (6) monthsfollowing the date on which the Optionee’s employment with the Corporation orany of its Subsidiaries, as the case may be, is terminated by reason of deathor (ii) in the case where the Optionee is a director of the Corporation orany of its Subsidiaries, as the case may be, but is not employed by either theCorporation or any of its Subsidiaries, six (6) months following the dateon which such Optionee ceases to be a member of the relevant Board of Directorsby reason of death;

 

6.2.3        in the case where the Optionee is an officer or employee, thirty(30) days following the date on which the Optionee’s employment with theCorporation or any of its Subsidiaries, as the case may be, is terminated forany cause or reason other than those mentioned in paragraphs 6.2.1and 6.2.2 including, without limiting the scope of the foregoing,disability, long-term illness, retirement or early retirement; or

 

6.2.4        in the case where the Optionee is a supplier of ongoing services,thirty (30) days following the date on which the Optionee ceases to act asa supplier of ongoing services to the Corporation or any of its Subsidiaries,as the case may be, for any cause or reason.

 

6.3           Subject to Section 6.4 hereof, all rights conferred by an optionunder the Plan that shall not have been exercised by either an Early ExpiryDate or the Outside Expiry Date shall be forfeited and cancelled.

 

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6.4           If an Early Expiry Date or the Outside Expiry Date applicable to anyoption granted under the Plan falls within a blackout period imposed by theCorporation under the Corporation’s trading restrictions and blackout periodspolicy (as such policy may be amended from time to time by theCorporation), or within seven (7) business days immediately following sucha blackout period, then the applicable Early Expiry Date or the Outside ExpiryDate, as the case may be, will be automatically extended to the date which isseven (7) business days after the last day of the blackout period. Theseven (7) business day extension period established in this paragraph is afixed period which is not subject to Board discretion.

 

**7.****            ****Exercise of Options**

 

7.1           Subject to the provisions of Section 6, an option may be exercisedin whole, at any time, or in part, from time to time, during the Option Period,but in all cases in accordance with the exercise schedule established by theBoard or the Committee and applicable at the time of the grant.

 

7.2           An option may be exercised by written notice to the Secretary of theCorporation. Such notice shall set forth the number of options exercised andthe number of underlying Shares subscribed for pursuant to such exercise andthe address to which the certificate evidencing such Shares is to be delivered.Such notice shall also be accompanied by a certified cheque made payable to theCorporation in the amount of the Exercise Price. The Corporation shallcause a certificate for the number of Shares specified in the notice to beissued in the name of the Optionee and delivered to the address specified inthe notice no later than ten (10) business days following the receiptof such notice and cheque.

 

**8.****            ****No Assignment**

 

8.1           No option or interest therein shall be assignable by the Optionee otherthan by will or in accordance with the applicable laws of estatesand succession.

 

**9.****            ****Not a Shareholder**

 

9.1           An Optionee shall have no rights as a shareholder of the Corporationwith respect to any Shares covered by his/her option until he/she shall havebecome the holder of record of such Shares.

 

**10.****         ****Offer for Shares of theCorporation**

 

10.1         In the event that, at any time, an offer to purchase is made to allholders of Shares, notice of such offer shall be given by the Corporation toeach Optionee and all unexercised options will become exercisable immediatelyat the Exercise Price, but only to the extent necessary to enable an Optioneeto tender his/her Shares in response to the offer should the Optioneeso desire.

 

**11.****         ****Modification of the Plan**

 

Board,shareholder and requisite regulatory approvals shall be required for any of thefollowing amendments to be made to the Plan:

 

11.1         any amendment to Section 3.2 that would have the effect of permitting,without having to obtain shareholder approval on a “disinterested vote” at aduly convened shareholders’ meeting, the grant of any option(s) under thisPlan otherwise prohibited by Section 3.2;

 

11.2         any amendment to the number of securities issuable under the Plan(except for any adjustment described in paragraph 12.1.4 hereof);

 

11.3         any amendment which would permit any option granted under the Plan tobe transferable or assignable other than by will or in accordance with theapplicable laws of estates and succession;

 

11.4         the addition of a cashless exercise feature, payable in cash orsecurities, which does not provide for a full deduction of the number ofunderlying securities from the Plan reserve;

 

11.5         the addition of a deferred or restricted share unit or any otherprovision which results in employees receiving securities while no cashconsideration is received by the Corporation;

 

11.6         with respect to any Optionee (whether or not such Optionee is an “insider”of the Corporation,

 

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(i)            any reduction in the exercise price of anyoption after the option has been granted, or

 

(ii)           any cancellation of an option and the re-grant of that option underdifferent terms,

 

except in respect of any adjustment described in paragraph 12.1.4hereof;

 

11.7         any extension to the term of an option beyond the Outside Expiry Dateto an Optionee who is an “insider” of the Corporation (except for extensionsmade pursuant to Section 6.4);

 

11.8         any amendment to the method of determining the exercise price of anoption granted pursuant to the Plan;

 

11.9         the addition of any form of financial assistance or any amendment to afinancial assistance provision which is more favourable to employees; and

 

11.10       any amendment to this Section 11.

 

**12.****         ****Amendments and Termination**

 

12.1         The Board may, subject to receipt of requisite regulatory approval,where required, in its sole discretion, make all other amendments to the planthat are not contemplated in Section 11 above including, withoutlimitation, the following:

 

12.1.1     amendments of a “housekeeping” or clerical nature or to clarify thePlan’s provisions;

 

12.1.2     amendments regarding any vesting period of an option;

 

12.1.3     amendments regarding the extension of an option beyond an Early ExpiryDate in respect of any Optionee, or the extension of an option beyond theOutside Expiry Date in respect of any Optionee who is a “non-insider” of theCorporation;

 

12.1.4     adjustments to the number of issuable Shares underlying, or theexercise price of, outstanding options resulting from a split or aconsolidation of the Shares, a reclassification, the payment of a stockdividend, the payment of a special cash or non-cash distribution to theCorporation’s shareholders on a *pro rata*basis provided such distribution is approved by the Corporation’s shareholdersin accordance with applicable law, a recapitalization, a reorganization or anyother event which necessitates an equitable adjustment to the outstandingoptions in proportion with corresponding adjustments made to all outstandingShares;

 

12.1.5     discontinuing or terminating the Plan; and

 

12.1.6     any other amendment which does not requireshareholder approval under Section 11 hereof.

 

12.2         Notwithstanding Section 12.1 above, the Corporation shall notcontravene any requirements, rules, laws and regulations of the TSX or of anyregulatory authorities.

 

12.3         Notwithstanding any provisions to the contrary, any amendment to ortermination of the Plan shall in no way amend or otherwise affect theconditions of the options already granted under the Plan to the extent thatsuch options have not then been exercised, unless the rights of theoptionholder have already expired or have already been fully exercised orunless the optionholder affected by such change has already agreed to it.

 

**13.****         ****Miscellaneous Provisions**

 

13.1         The Corporation’s obligations under the terms of the Plan are subjectto all applicable laws, regulations or rules of any governmental agency orother competent authority in respect of the issuance or distribution ofsecurities and to the rules of any stock exchange on which the Shares arelisted. Each Optionee shall agree to comply with such laws, regulations and rules andto provide to the Corporation any information or undertaking required to complywith such laws, regulations and rules.

 

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13.2         The participation in the Plan of a director, an officer or anemployee of the Corporation or any of its Subsidiaries shall be entirely optionaland shall not be interpreted as conferring upon a director, an officer oran employee of the Corporation or any of its Subsidiaries any right orprivilege whatsoever, except for the rights and privileges set out expressly inthe Plan. Neither the Plan nor any act that is done under the terms of the Planshall be interpreted as restricting the right of the Corporation or any of itsSubsidiaries to terminate the employment of an officer or employee at any time.Any notice of dismissal given to an officer or employee at the time his/heremployment is terminated, or any payment in the place and stead of such notice,or any combination of the two, shall not have the effect of extending theduration of the employment for purposes of the Plan.

 

13.3         No director, officer or employee of the Corporation or any ofits Subsidiaries shall acquire the automatic right to be granted one or moreoptions under the terms of the Plan by reason of any previous grant of optionsunder the terms of the Plan.

 

13.4         The Plan does not provide for any guarantee in respect of any loss orprofit which may result from fluctuations in the price of the Shares.

 

13.5         The Corporation and its Subsidiaries shall assume no responsibility asregards the tax consequences that participation in the Plan will have for adirector, an officer or an employee of, or supplier of ongoing services to, theCorporation or any of its Subsidiaries, and such persons are urged to consulttheir own tax advisors in such regard.

 

13.6         The Plan and any option granted under the terms of the Plan shall begoverned and interpreted according to the laws of the Province of Quebec andthe laws of Canada applicable thereto.

 

13.7         Once approved by the Corporation’s shareholders, the Plan will modifythe stock option plan adopted by the Corporation on November 7, 1995 asamended. This Plan confers no other advantage to the beneficiaries ofthe stock option plan.

 

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**STOCK OPTION PLAN**

 

**OF ÆTERNA ZENTARIS INC.**

 

SUBSCRIPTION FORM

 

(Date)

 

Æterna Zentaris Inc.1405 boul. du Parc-TechnologiqueQuébec, QuébecG1P 4P5

 

Attention of the Secretary

 

I, theundersigned,                                        ,hereby exercise                    options and subscribe for                    Common Shares of Æterna Zentaris Inc. (the “Corporation”) pursuant to theexercise of such options under the terms of the Stock Option Plan of theCorporation, out of the                      Common Shares available for purchase by the undersigned, and I enclose herewithmy certified cheque (or money order) made payable to the order of ÆternaZentaris Inc., in the amount of                                                                dollars in payment of the said subscription.

 
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·      The French version of this Scheduleshall prevail.

 

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